Contracts for Sale of Goods: Everything You Need to Know

Contracts for sale of goods are the most common and important of any commercial contract.3 min read

Contracts for sale of goods are the most common and important of any commercial contract. A sales agreement is also called a sales contract or sales of goods contract and specifies terms between two individuals or businesses. In essence, contracts are all around you in the following forms:

Owning cars

Renting apartments

Getting cell phones

Paying for cable

Paying plumbers

A contract cannot be created without an agreement in place. With that, a written sales contract helps you and other parties understand pertinent information of an agreement, while reducing the chances of disputes. All types of contracts fall within the implied category under the Sales of Goods Act of 1896.

The Goods Act of 1986 allows everyone to better understand how to draft contracts and how to sell or buy goods without breaking contract terms. When creating a sales agreement, detail the item or service in question, which should include physical descriptions and sold quantities.

Buyer: An individual or business that purchases a service or good from the seller

Seller: A business or individual that sells a service or good to a buyer

When it comes to service contracts, you need to come up with a payment plan. The payment type depends how the buyer will pay the seller. A payment may come in the following forms:

Certified check

Cash

Promissory note

Paypal

Email transfer

Bank drafts

Deposit Clauses

Sellers should give receipts to buyers for all transactions that involve cash. A deposit is a certain amount of money a buyer gives to sellers as a form of security. If a buyer chooses to purchase a service or good, the deposit will be applied to the purchase price in question. The deposit itself can be nonrefundable or refundable, meaning that the deposit can be returned to the buyer, or the seller can keep it if the deal falters. Also, you should include due dates for payments and deposits within the sales agreement to make the payment terms clearer.

Always include terms on the delivery method of the goods. Such goods can be delivered in the following ways:

Seller address

Buyer address

Other location

The seller should be compensated after the buyer receives the goods and the seller has shipped the items, or if a bill of sale is created.

Sales Agreements

A sales agreement and bill of sale achieves similar aims, but a sales agreement provides detailed payment plans and issues warranties on the items. A sales agreement also gives both parties greater flexibility and safeguards the goods before they are rightfully purchased.

When it comes to bill of sale, it is proof that ownership has been shifted from one party to the other. In addition, a bill of sale may be used as a portion of a sales agreement to prove that goods have changed hands officially.

Liability Clause

A liability clause addresses a good in the event of damage or loss. Liability may be transferred to the buyer when:

The buyer retains ownership via bill of sale

The buyer receives the items

The seller ships the items

Warranty Importance

A warranty refers to a guarantee that sellers make about the condition and quality of the goods. You can get a sense of the transaction through the following examples:

As Is Sales

When a seller provides no warranties, they are selling it as is, meaning that they do not guarantee that the good is high-quality. On this condition, the buyer would agree to purchase the item despite an item’s potential flaws. With that, such a transaction is only legitimate if the seller did not hide damages or flaws from the buyer.

To find out more about contracts for sale of goods, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers will help you draft a solid contract that secures your interests in any transaction. Our attorneys will also provide guidance on how to deal with any legal disputes that may take place during a transaction.

UpCounsel is an interactive online service that makes it faster
and easier for businesses to find and hire legal help solely based on their preferences. We are not a
law firm, do not provide any legal services, legal advice or "lawyer referral services" and do not provide
or participate in any legal representation.